CoolSavings directors forgive own loans

Directors of CoolSavings.com Inc. voted last month to forgive $3.7 million in loans--plus interest--they and others owed for stock they purchased before the company went public last year, according to Securities and Exchange Commission filings.

CoolSavings took a one-time charge in the second quarter to write off the debt, according to a quarterly report Friday. The charge represented about one-third of the company's total $10.2 million net loss in the second quarter.

The Chicago-based online distributor of coupons recently announced a management shake-up and a $15 million cash infusion from Landmark Communications Inc. of Norfolk, Va.

Former President Matthew Moog was named chief executive, replacing former CEO and Chairman Steven Golden, who remains a director. Investor Richard Rogel, a director, is non-executive chairman.

Moog was not on the board July 18 when Rogel and Golden voted with two other directors, Hugh Lamle and Lynette Mayne, to write off their loans and that of a fifth director, Albert Aiello. Aiello abstained from the vote, according to SEC documents.

"I believe the board reasoned that we never compensated the directors with cash, so this was one way to compensate them for the energy they put into the company," Moog said Friday.

Rogel and Golden owed $1.9 million and $805,136, respectively, according to SEC filings. Neither could be reached Friday. Aiello, Lamle and Mayne each owed about $134,000.

According to the SEC filing, the loans held borrowers personally liable for 20 percent of the principal, which was due in four years. Interest payments of between 4.83 percent and 6.71 percent were due annually.

Such loans to insiders to exercise stock options or warrants were common during the dot-com stock boom in 1999 and 2000, when it was presumed the stock would be worth far more than the outstanding debt.

But when dot-com stocks collapsed, borrowers were left with big debts--and in some cases onerous tax bills--for stock that was virtually worthless.

At CoolSavings, Rogel's 862,500 shares, purchased with a company loan of $1.2 million, were worth about $6 million when CoolSavings went public in May 2000. On Friday, when CoolSavings closed at 20 cents per share, they were worth $172,500.

Not all companies are bailing out insiders at the expense of common shareholders, however. At Comdisco Inc., which entered bankruptcy protection last month, 106 executives were provided five-year bank loans, backed by the company, to buy a total of $109 million worth of Comdisco shares.

The executives bought the stock at a split-adjusted $17.25 per share. Comdisco's stock closed Friday at $1.37.

While many of these executives may have to declare personal bankruptcy because of the loans, the company does not plan to bail them out.

"[The loans are] the obligations of the employees," said Norm Blake, Comdisco's chief executive. "I think they are going to have to deal with it individually."